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Tuesday, June 23, 2015

Maybank Research ups BIMB to RM4.80

KUALA LUMPUR: Maybank Investment Bank Research has raised its sum-of-parts for BIMB Holdings to RM4.80 from RM4.70 after on factoring in a higher fair value for Syarikat Takaful Malaysia Bhd (STMB).

BIMB holds a 100% stake in Bank Islam and a 60% stake in STMB. In 1QFY15, STMB contributed to about 20% of the group’s net profit.

It said on Tuesday that market is pricing Bank Islam at price-to-book value (P/BV) of just 1.1 times for 14% return on equity.

Maybank Research said STMB’s current market cap at RM3.91 a share is about RM3.19bil, of which a 60% stake translates to RM1.91b. BIMB’s market cap at RM 4.03 a share works out to be RM6.21bil.

“Our fair value for STMB is derived from the dividend yield (DY) model, imputing a fair yield of 4% (versus 4.5% previously) against a DPS of 15 sen, which is similar to that paid in FY14. This translates to a fair value of RM3.75 a share for STMB versus RM3.35 a share previously,” it said.

The research house also attached a 2015 P/BV multiple target of 1.7 times to Bank Islam, supported by ROAEs of about 14% for the bank.

At RM4.80, BIMB group would trade at a FY15 P/BV of 2.0 times, which would be supported by ROEs of about 17%.

“We estimate a dividend yield of 3.7% for BIMB in FY15, which is about the same as what STMB currently offers. With valuations seemingly stretched at STMB but still low at BIMB, the latter offers better risk-return. Buy BIMB,” it said.

To recap, STMB’s share price has strongly outperformed the market in recent weeks, having surged 78% year-to-date. Much as it has been a dividend yield story, STMB’s dividend yield is now just about 3.8% based on its closing share price of MYR3.92 and FY14’s DPS of 15sen (payout ratio of 88%).

“While the yield is still decent, we do think that the upside here on is limited, especially since the stock also trades at a hefty historical end-Mar 2015 P/BV of 5.1 times relative to an average of about 1.5 times for its peers.

“We would as such, recommend that investors switch to BIMB instead, for the under-valuation of Bank Islam,” it said.